States Have Lost $5 Billion in Unemployment Aid

Despite bipartisan support in the U.S. Senate for reinstating emergency aid for the long-term unemployed, prospects remain dim in the Republican-controlled House. Meanwhile, the toll of the expired extended benefits on states is mounting.

Five billion dollars of aid has been lost as of April 5, including at least $100 million for 13 states, according to an analysis of U.S. Department of Labor data from the National Employment Law Project, a group that advocates for safety-net programs. More than 1 million workers have exhausted their regular benefits and have not had access to long-term aid since the expiration took effect.

RELATED

The extended benefits, which began under President George W. Bush in 2008, allowed unemployed workers to collect aid for up to 99 weeks, instead of the normal 26 weeks. But the program expired on Dec. 28 and Congress is divided on whether to renew it.

Now that the economy is improving, many conservatives argue the extended benefits are no longer needed, and might be a disincentive for the jobless to find work. Republican Sen. Jim Inhofe, of Oklahoma, spoke for many conservatives when he recently warned against “turning a temporary federal benefit into another welfare program.”

The fact that they are getting $300, or used to get $300, is not an incentive to sit home. That pays the gas. That pays the cellphone,” U.S. Secretary of Labor Thomas Perez told Stateline last week. “The cruel irony is that people’s cell phones are getting turned off and when the job call comes, the phone is disconnected because they can’t pay the bill, and that’s why this has an impact on people living in states all across the country.”But supporters note that many states continue to have record-high numbers of people who have been unemployed for six months or longer. Nationally, about 3.8 million people, or a third of all jobless Americans, have been out of work for that long, according to the Bureau of Labor Statistics.

Supporters tout the program as an effective economic stimulus, since struggling recipients are likely to spend the money immediately. The Congressional Budget Office estimated that the expiration of the benefits would cost the country 300,000 jobs this year, with thousands lost in the states hardest hit by the recession. Government and private economists have estimated the end of long-term jobless aid could shave 0.4 percent off the country’s GDP this year.

According to research by Mark Zandi, chief economist of Moody’s Analytics, the extended benefits program generated $1.55 in economic activity for every $1 spent.

States largely are responsible for regular unemployment benefits, but the federal government covered the cost of the extended benefits. From 2008 through the first half of 2013, Washington spent $252 billion on extended benefits to help at least 24 million long-term unemployed Americans.

“It has a devastating effect on their ability to maintain the essentials of their households,” Mitchell Hirsch, an unemployed worker advocate with NELP, said of jobless Americans. “You have people who had been able, with their unemployment insurance benefits, to barely make ends meet and scrape by. Now they’re in a really desperate place.”

Some Senate Republicans have joined the Democratic majority in supporting an extension of the program for five months. But Republican House Speaker John Boehner has raised concerns about the nearly $10 billion cost of the measure.

The political action arm of the conservative Heritage Foundation has made the same point. It also contends that extending the benefits will make the unemployed “more likely to be selective in their search, take their time and not bother to consider remedies like relocation or industry transition.”

The experience of North Carolina, which ended its extended jobless aid six months before it expired for the rest of the country, offers ammunition for both sides of the debate.

Since those cuts took effect last summer, federal data show the state’s unemployment rate has fallen almost 2 percentage points. Research has also shown an increase in employment. At the same time, however, overall participation in the state’s labor force has declined. Those studying the issue have admitted they’ve been unable to reconcile the conflicting evidence.